FINANCE AND INVESTMENT

How did the Hartford Foundation’s investments perform in 2016?

2016 was dominated by political shocks that resulted in short-term volatility in the global financial markets followed, often quickly, by a return to stability. From January through June, falling government bond yields and concerns about low growth and inflation impacted securities prices. During the second half of the year, bond yields rose amid rising oil prices, looser fiscal policy in many countries and the outcome of the U.S. presidential election. The U.S. equity market averages finished strong in spite of the volatility. In 2016, the S&P 500 index rose nearly 12%. Overseas, the MSCI EAFE Index rose 1% while the MSCI Emerging Market index rose 11.2%. The Barclays Capital Aggregate Bond Index, a broad measure of the U.S. bond market, gained 2.6% for the year. Against this backdrop, the Foundation’s broadly diversified Corporate Portfolio posted an investment return of 7.3%, while the Trust Portfolio returned 6.3%.

“We are diligent stewards of our donor’s resources and vision for the community. We balance risk and return, growth and spending in order to provide the financial stability required to fulfill our mission, now and in the future.”

How does the investment performance help to provide grants to the community?

The Foundation’s spending policy and investment strategy are designed to work together to preserve the inflation-adjusted value of the portfolio over a long time horizon. The Hartford Foundation aims to achieve investment returns that preserve the long-term spending power of the endowment after grants and administrative expenses have been paid. We measure portfolio progress toward this goal by comparing it to the Consumer Price Index (CPI), a broad measure of inflation, plus 5%, the spending rate stipulated in our spending policy.

From September 1996, when systematic measurement of the Foundation’s investment returns commenced, through December 2016, the Corporate Portfolio has returned 7.4% per year, net of investment management fees. The Trust Portfolio produced a net annualized return of 6.9 % over that period. These returns compare with the aforementioned CPI + 5% goal of 7.4% annualized over the same time frame.

Investment Returns

The Hartford Foundation’s assets are managed by its corporate affiliate, HFPG, Inc. (the “Corporate Portfolio”) and by the Trustee Banks (the “Trust Portfolio”). Donor funds held by HFPG, Inc. are invested on a diversified basis with professional investment managers retained by the Foundation’s Investment Committee.

Bank of America, N.A. acts as the Trustee for the component trusts that are held in a common fund—the other trustee bank is KeyBank. The Trustee has sole authority to invest in a diversified portfolio with professional investment managers (which may include Bank of America, N.A. or any of its affiliates) chosen on a competitive basis. Both HFPG, Inc. and Bank of America use the services of a professional investment consultant.

The investment performance* of the Foundation’s broadly-diversified endowment portfolios for periods ended December 31, 2016 follows: